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Understanding the Economic Consequences of Shifting Trends in Population Health

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Author Info
Michaud, Pierre-Carl () (RAND)
Goldman, Dana P. () (RAND)
Lakdawalla, Darius N. () (RAND)
Zheng, Yuhui () (RAND)
Gailey, Adam H. (RAND)

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Abstract

The public economic burden of shifting trends in population health remains uncertain. Sustained increases in obesity, diabetes, and other diseases could reduce life expectancy − with a concomitant decrease in the public-sector's annuity burden − but these savings may be offset by worsening functional status, which increases health care spending, reduces labor supply, and increases public assistance. Using a microsimulation approach, we quantify the competing public-finance consequences of shifting trends in population health for medical care costs, labor supply, earnings, wealth, tax revenues, and government expenditures (including Social Security and income assistance). Together, the reduction in smoking and the rise in obesity have increased net public-sector liabilities by $430bn, or approximately 4% of the current debt burden. Larger effects are observed for specific public programs: annual spending is 10% higher in the Medicaid program, and 7% higher for Medicare.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4366.

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Length: 43 pages
Date of creation: Aug 2009
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Handle: RePEc:iza:izadps:dp4366

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Related research
Keywords: disability; health care costs; social security; microsimulation;

Other versions of this item:

Find related papers by JEL classification:
I10 - Health, Education, and Welfare - - Health - - - General
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
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  2. Pierre-Carl Michaud & Arthur van Soest & Tatiana Andreyeva, 2007. "Cross-Country Variation in Obesity Patterns among Older Americans and Europeans," Social and Economic Dimensions of an Aging Population Research Papers 185, McMaster University. [Downloadable!]
    Other versions:
  3. MacKinnon, James G & Magee, Lonnie, 1990. "Transforming the Dependent Variable in Regression Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 315-39, May. [Downloadable!] (restricted)
  4. Eric French, 2005. "The Effects of Health, Wealth, and Wages on Labour Supply and Retirement Behaviour," Review of Economic Studies, Blackwell Publishing, vol. 72(2), pages 395-427, 04. [Downloadable!] (restricted)
  5. Michaud, Pierre-Carl & van Soest, Arthur, 2008. "Health and wealth of elderly couples: Causality tests using dynamic panel data models," Journal of Health Economics, Elsevier, vol. 27(5), pages 1312-1325, September. [Downloadable!] (restricted)
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  6. Pierre-Carl Michaud & Arthur H.O. van Soest & Tatiana Andreyeva, 2007. "Cross-Country Variation in Obesity Patterns among Older Americans and Europeans," Forum for Health Economics & Policy, Berkeley Electronic Press, vol. 10(2). [Downloadable!]
  7. Adams, Peter & Hurd, Michael D. & McFadden, Daniel & Merrill, Angela & Ribeiro, Tiago, 2003. "Healthy, wealthy, and wise? Tests for direct causal paths between health and socioeconomic status," Journal of Econometrics, Elsevier, vol. 112(1), pages 3-56, January. [Downloadable!] (restricted)
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